This is part 3 of my blog series called: “Building a start-up in the SAP HANA space“.
What is considered a “Startup”?
“A startup is a company working to solve a problem where the solution is not obvious and success is not guaranteed”
Neil Blumenthal, cofounder and co-CEO of Warby Parker.
Startup or Side Project?
To me, the big difference is your expectations. Generally in a side project, you have little or no expectations of financial reward or success, these projects are a labor of love and something which is intended to help a community or yourself to achieve a goal. Don’t get me wrong, it could also include financial incentive, like getting paid for your time or materials. A startup is not much different, they too are a labor of love, and command a considerable amount of attention and dedication, however, your goal for the venture is some form of success. This goal is to generate revenue in some shape or form, and often it comes with the pressures of operational overhead, tight release schedules and financial burden.
In my opinion, side-projects which evolve into a startup are the best. Why? Generally side projects are bootstraped by your regular employment, and you spend your spare time working on them, but the great part is that you are not *required* to succeed and have a regular income to sustain your “bad habit” 🙂 As your side-project evolves, you can decide if you have the required income and reach to “transition” your project to a startup as it grows.
It will also be evident, when the time is right to transition, because you may have some form of revenue being generated, or you feel you and your project is ready for the next evolutionary step. In doing so you are going to find yourself faced with many challenges and rewards, and much like life, the ups, and more specially the downs, are going to decide the fate of the overall success of your startup.
Below is a description of various stages of a startup lifecycle, we will touch on a few of these in some subsequent blogs:
During the discovery stage, startups should be focused on validating whether they are solving a meaningful problem and the potential market share, and impact which is possible. During this time a founding team might be formed, customer interviews conducted and a value proposition is defined. A minimal viable product (MVP) is created and this is a great time to consider joining an accelerator or incubator. You may also consider trying to get some financial support from friends and family or a early stage venture capital company to support your team and visions. Also keep in mind that these the opportunity to pitch your idea to various VC’s can be both positive and negative.
Your startup should be looking to get early validation from customers, if you have to beg, borrow, donate an organ, or steal these, do it 🙂 . Every one of your validation contacts are worth their weight in gold. Your goal at this stage is to refine core features, try to gain some initial user growth as well as understand some key KPI’s which you would like to use to define your startups success. During the validation period is a also good opportunity to consider getting some seed funding and considering building out your team. You will also hopefully gain some paying customers and consider pivoting your product to meet their requirements.
During the efficiency stage, a startup should validate their business model and improve the effectiveness of their customer acquisition process, and avoid losing too many customers in the process. Hopefully by now your value proposition is refined, user experienced overhauled, conversion funnel optimized, and a steady growth pattern is being achieved. From my experience, this is where you start feeling like you are starting to succeed, you have a product which is starting to generate some form of revenue and you often start seeing the direct correlation between a marketing or advertising campaign versus the impact on your customer base.
During the scale phase, startups step on the gas pedal and try to drive growth very aggressively. This could be driven by a large A Round of funding (or hopefully you have enough in your own bank balance) and you focus on customer acquisition through a ramp up in your sales team. During this stage you brace yourself for load by making scalability improvements, support teams or infrastructure to handle the impact. Hopefully by now your revenue stream or funding has some space for some new executive hires, and you shift your focus from developing your core product to defining some processes to support the product and business services in a structured way.
You may also consider establishing departments and teams within your group to handle some of the administration functions. Starting to sound familiar? If so, it might be time to reconsider that you now have a Company, versus a Startup!
Sorry for all the non-technical HANA content in this post, but I really think its important to help you understand where you are, and even more importantly what to expect.
In my next blog post we will chat a bit more about MVP’s (Minimum Viable Product) and we will also look into the SAP Startup Focus program and how it can help you get started and on the path to the first stage of “Discovery”.